<aside> What’s this about? All corporations, including nonprofits, are legally required to have a board of directors.
What do I need to do? Make sure you build a board of experienced individuals with a mixed skillset who can advise on governance, strategy, and execution.
Contents
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Further reading
Templates
A board is required for a nonprofit, and its core responsibility is to ensure that the organization fulfills its mission.
Unlike a for-profit, where control of the organization can be “owned” and “sold,” nonprofits can’t be owned, and the board’s job is upholding the mission statement. That’s its job even if it explodes the entire organization.
A board comprises a number of directors. (Directors can also be called “board members”; they may also be called “trustees” if they’re directors of a nonprofit, though this is rarer.)
If you’re the CEO and founder of the organization, you can still be a board member. Once your organization has raised a substantial amount of funds, we generally advise the CEO to step aside from the board (as it limits the board’s independence, muddies lines of authority, and limits the organization’s ability to benefit from the skills, experience, and capacity of another individual).
Founders of nonprofits are sometimes tempted to create small or weak boards out of fear of losing control of their organizations. It’s good to be cautious, but also good to be aware that boards can be very helpful — and, ultimately, it’s hard to have a sustainable nonprofit without one.
All directors have specific fiduciary duties and legal requirements to adhere to.
To ensure that directors are fulfilling their fiduciary duties and legal requirements, we recommend implementing a conflicts of interest policy for board members and personnel. See Maintain a healthy board for more information.
For nonprofits, directors must meet the following minimum requirements:
Board meetings: Directors must attend board meetings at least once a year. For more information on board meetings, see Incorporate your organization.
Fraud liability: Directors have the legal liability to ensure that nothing fraudulent happens.
Charitable purpose: Directors are responsible for ensuring that the nonprofit is pursuing its charitable purpose
Mission: Directors must be interested in the organization's success, meaning that they care about its mission (which isn’t identical to its charitable purpose).
Fiduciary duties
Legal requirements
The following table shows the requirements for boards and offices of nonprofits, by state.
A given officer (i.e. individual, whether director or not) can typically hold two or more offices (i.e. roles). For example, if “Secretary” and “Treasurer” are both required, a single individual could occupy both these roles.
“Defined in articles” means that whether or not the office is required is defined by either the articles of association or the bylaws. For more information on articles of association and bylaws, see Create governing documents.
Note that while some states require fewer than 3 board members to incorporate, once you apply for 501(c)3 status, you’ll need 3 board members (since state law and federal law differ in the US). So you can temporarily have fewer than 3 directors as you get set up to apply, but then should add additional directors.
A board is elected by the owners and/or founders of the organization.
So, in the case of a corporation, directors must be elected by shareholders (or the founders, if its a nonprofit corporation without shareholders).
You’ll generally want at least three directors in your board. There’s no legal requirement for them to have individualized titles or responsibilities.
It’s somewhat common for a nonprofit to initially build its board of directors using partners, family, and friends to fill the necessary roles.
It speeds up the entity setup process, and the board members can be changed once you’ve had enough time to recruit directors with more expertise.
However, a “family and friends” board may turn out to be unsupportive, neglectful, or even harmful to the organization, and can be tricky to unravel when needed. The transition to a more mature board is easier if the organization has started out the way it means to go on, even if it is more informal than it might grow to be. There are also organizational culture and sustainability issues affected by setting up a weak starter board.
So, when building or updating your board of directors in the direction of more expertise, look for individuals who are passionate about your cause, aligned with your vision, and can lend their expertise to help your organization.
In order to build your board, it’s helpful to draft a proposal for prospective directors explaining their expected responsibilities, your entity’s expected activities, your funding model, and your route to impact.
Given the requirements of a director, and our suggested criteria for assessing the value of potential directors, avoid the temptation to populate the board with friends and people with a similar background to yourself.
You’ll typically focus on three criteria for assessing the value of potential directors for your board: governance, strategy, and execution.